JPM and Goldman See $1,800/oz Gold By Year End – Iran, Middle East and Inflation Risks Cited

Today's AM fix was USD 1,708.50, EUR 1,355.09, and GBP 1,074.53 per ounce.Yesterday's AM fix was USD 1,689.50, EUR 1,349.23 and GBP 1,065.26 per ounce.

Silver is trading at $32.55/oz, €25.94/oz and £20.55/oz. Platinum is trading at $1,582.50/oz, palladium at $644.80/oz and rhodium at $1,025/oz.

Cross Currency Table - (Bloomberg)

Gold edged down $1.70 or 0.1% in New York yesterday and closed at $1,693.60. Silver fell off in Asia then rallied to a high of $32.35 in New York trading, and finished with a loss of 9 cents.

Gold rose in all major currencies today and topped $1,700/oz in London for the first time since March on speculation ECB will announce further monetary easing. While gold rose 1%, silver surged another 2%.

Bullion rose ahead of the ECB policy meeting and "Super" Mario Draghi's speech where investors expect to hear announcements on further short term bond buying and possibly an interest rate cut.

Some market participants remain dubious that Draghi's can resolve the crisis and gold's rise today may be an indication of that. 

Indeed, expectations that 'Super Mario' will save the day and in one fell swoop save the euro from collapse are plain silly. At best, Draghi may again manage to buy time by once again 'kicking the can down the road.'  Thereby, creating much larger problems down the road. 

The ECB will announce its decision on interest rates at 12.45pm BST (1.45pm CEST), followed by a press conference 45 minutes later.

BOE will also announce its own decision on monetary policy at noon BST. The 2nd estimate of eurozone 2Q GDP was released this morning and at 0.2% the contraction was in line with estimates. 

Volatility can be expected today and we would not be surprised if gold came under pressure during Draghi's announcement as has happened on previous occasions.

However, all dips in gold should be used as buying opportunities.

XAU/EUR Exchange Rate Daily - (Bloomberg)

Gold at €1,355/oz, just 2.5% from the record high of €1,390/oz, is a sign of a continuing lack of trust in the euro and in Draghi's stewardship at the ECB.

Investment and diversification demand for gold remains robust as seen in the gold holdings in exchange-traded products or trusts rose to a record for a second straight day. The amount increased 2.85 metric tons, or 0.1 percent, to 2,470.67 tons, data tracked by Bloomberg showed.

G21 Gold Price Daily - (Bloomberg)

Research houses, analysts and banks are revising their estimates for year end 2012 gold prices higher.